Welcome To The API Economy

Think back to the 1990s. It was a disruptive time for traditional business models, beginning with the rush for a Web presence, followed by the shift from bricks and mortar to so-called “clicks and mortar.” Today, application programming interfaces – commonly known as APIs – are the new must-have for business, representing the future of customer and community engagement with far broader implications than traditional Web-based business models.

APIs used to be a technical implementation detail reserved for developers and architects. Most executives could hardly spell A-P-I, let alone understand their purpose for programmatic access to software-based products.

But that’s quickly changing, as APIs become a primary customer interface for technology-driven products and services and a key channel for driving revenue and brand engagement.

Social everything, mobile everywhere

What’s changed? You can thank social networking, social commerce, social content and their patron saints Facebook, Twitter, Netflix, Amazon and eBay, among others; and, in no smaller measure, a vibrant, viral (some may say virulent) generational culture of simple, clever and targeted end-user applications driven by Apple, Android and the rise of the app economy. Mobile devices are our new appendage and apps are the currency of trade.

This confluence of factors has created a perfect storm of sorts where a vast constellation of applications meets a massive network of end-users. At the center is an explosive opportunity to find and mine new customers and communities that companies can tap into by way of APIs.

Standing on the shoulders of visionaries

Amazon CEO Jeff Bezos is known for his uncanny ability to see around corners and to identify patterns before the rest of us. That visionary insight led him to famously mandate that all IT assets were to be exposed as APIs. That single, simple declaration created an IT (and cultural) architecture that catalyzed and stoked the stunning growth of Amazon Web Services, which is thought to be a billion-dollar business unit after only a few short years of growth.

Perhaps even more impressive is the fact that, today, Salesforce.com generates more than half of its $2.3 billion in revenue through its APIs, not its user interfaces. Twitter is said to process 13 billion transactions a day through its APIs. Google is around 5 billion transactions a day. For it’s part, Amazon is rapidly closing in on a trillion transactions. Not bad for an online bookseller.

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A couple of the early movers in this space are, 99Presents & Shopycat. Well, Shopycat is not using API, they are using their own database while 99Presents is using APIs from other sites, like Amazon, ebay etc. I want to see how these companies grow.

For the big players (Google, Salesforce, Twitter), you simply launch an API and everyone starts playing with it. For everyone else, the challenge is making sure you have a compelling value proposition and raising awareness with developers. Given how much developers hate marketing, you have to take a completely different approach.

But to really make an API work, either internally or externally, you need to really create an API economy in which the owner of the asset being exposed, the publisher of the API, developers, and users of the apps all get substantial benefit.

For an end-to-end tour of these questions, see my book: APIs: A Strategy Guide

Here is an additional complementary insight on the API Economy written by Steve Willmott the CEO of 3scale – A leading API Management solution provider – earlier in August 2012: http://pandodaily.com/2012/08/07/why-the-app-economy-isnt-the-app-economy-but-the-api-economy/